Taxing Soda and Candy: Making Money from Obesity

December 20, 2011 | By: TaxCure Staff

sugar and soda taxesWith the recent recession on, it makes sense for states to cast about, looking for revenue. One source of revenue for many states has been through so-called “sin taxes.” These taxes, levied on cigarettes and alcohol bring in revenue – and few people complain much about them because they are considered “vices.”

According to the Tax Foundation, 17 states have candy taxes that charge more for sweets than for other grocery items. Additionally, four states collect an extra tax on soda. In 2011, two states proposed new candy taxes, and 14 states considered soda taxes. With so much focus on obesity and health in recent years, there are hopes that legislatures can pass these taxes without too much opposition.

Taxing Unhealthy Behaviors

Because poor health costs the economy quite a bit each year, many legislators feel justified in taxing items that contribute to disease, especially Type II diabetes and heart disease, as sugary foods and drinks do. Additionally, it helps when the behaviors are shunned by most of society. One of the reasons that many states continue to raise taxes on cigarettes is that many consider smoking unacceptable. As a result, there is little outcry from the general population when cigarette taxes are raised.

Fewer people are complacent when it comes to raising taxes on alcohol since alcohol is still socially acceptable. Candy and soda taxes, though, are a little harder to stomach for many, though, because these are items that are part of everyday life.

However, the fact that so many states are in various stages of implementing taxes on candy and soda is indicative of the idea that health is becoming a bigger concern. And, of course, because billions of dollars are spent on soda and candy each year, states stand to see significant revenue from “sugar taxes.”

Problems with Implementing Sugar Taxes

One of the issues related to legislating taxes on candy and soda is that it can be difficult to determine where to draw the line. Taxing tobacco is fairly straightforward, as is taxing alcohol. But what constitutes “candy” or “soda”? Coming up with a standard definition can be difficult. Should energy drinks be lumped in with more traditional sodas? What about other carbonated beverages, such as sparkling apple juice? In some cases, a sugary food can avoid the label “candy” with the help of a certain combination of ingredients. And what about gum? Is that candy?

Deciding which items should be taxed because of nutritional content is no easy task, and it can result in the addition of dozens of pages to any legislation. It is common to list specific ingredients in candy and soda or to need other detailed descriptions of affected items.

On top of that, there are costs involved with collecting new taxes. So, that eats into some of the revenues from the taxes. For the most part, though, adding such sales is relatively easy, and the increased revenue normally outweighs such costs.

Another major problem is that may say the government is starting to erode our liberties even more by discouraging behavior they think is bad. In other words, taxing soda and sugar intends to control us more.  Do we want to create a society where government protects us from ourselves?

Of course, there is always the chance that the taxes will encourage consumers to stop purchasing such unhealthy items. However, no matter what politicians say about curbing the behaviors that lead to obesity and its related ills, they don’t actually expect most consumers to modify their actions. Indeed, they might be counting on it in order to raise more money.